Market

Puma Biotechnology, Inc. (PBYI) CEO Alan Auerbach on Q4 2021 Results – Earnings Transcript

Puma Biotechnology, Inc. (NASDAQ:PBYI) This fall 2021 Earnings Convention Name March 3, 2022 4:30 PM ET

Firm Contributors

Mariann Ohanesian – Senior Director, IR

Alan Auerbach – Chairman, President & CEO

Jeff Ludwig – Chief Business Officer

Maximo Nougues – CFO

Convention Name Contributors

Edward White – H.C. Wainwright

Carly Kenselaar – Citi

Marc Frahm – Cowen

Alex Hammond – Financial institution of America

Disclaimer*: This transcript is designed for use alongside the freely out there audio recording on this web page. Timestamps inside the transcript are designed that can assist you navigate the audio ought to the corresponding textual content be unclear. The machine-assisted output offered is partly edited and is designed as a information.

Operator

00:04 Good afternoon, my identify is Alexandra, and I might be your convention name operator at the moment. Presently, all individuals are in a listen-only mode. After the audio system’ formal remarks, there might be a question-and-answer session. [Operator Instructions] As a reminder, this name is being recorded.

00:38 I’d now like to show the convention name over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. Chances are you’ll start your convention.

Mariann Ohanesian

00:47 Thanks, Alex. Good afternoon and welcome to Puma’s convention name to debate our monetary outcomes for the fourth quarter of 2021. Becoming a member of me on the decision at the moment are Alan Auerbach, Chief Govt Officer, President and Chairman of the Board of Puma Biotechnology; Maximo Nougues, Chief Monetary Officer; and Jeff Ludwig, Chief Business Officer.

01:09 After market closed at the moment, Puma issued a information launch detailing fourth quarter 2021 monetary outcomes. That information launch, the slides that Jeff will consult with and a webcast of this name are accessible by way of the house web page and Traders sections of our web site at pumabiotechnology.com. The webcast and presentation slides might be archived on our web site and out there for replay for the subsequent 90 days.

01:37 Right now’s convention name will embody statements in regards to the firm’s future expectations, plans and prospects that represent forward-looking statements for functions of federal securities legal guidelines. Such statements are topic to dangers and uncertainties and precise occasions and outcomes might differ from these expressed in these forward-looking statements.

01:57 For a full dialogue of those dangers and uncertainties, please evaluate our periodic and present studies filed with the Securities and Trade Fee on occasion, together with our annual report on Type 10-Ok for the 12 months ended December 31, 2021. You might be cautioned to not place undue reliance on these forward-looking statements, which communicate solely as of the date of this reside convention name, March 3, 2022. The corporate undertakes no obligation to revise or replace any forward-looking statements to mirror occasions or circumstances after the date of this convention name, besides as required by legislation.

02:36 Throughout at the moment’s name, we might also consult with sure non-GAAP monetary measures that contain changes to our GAAP figures. We consider these non-GAAP metrics could also be helpful to buyers as a complement to however not an alternative to our GAAP monetary measures. Please consult with our fourth quarter 2021 information launch for a reconciliation of our GAAP to non-GAAP outcomes.

03:00 I’ll now flip the decision over to Alan.

Alan Auerbach

03:03 Thanks, Mariann and thanks all for becoming a member of our name at the moment. Right now Puma reported whole income for the fourth quarter of 2021, a $55.4 million. Whole income consists of product income, internet which consists totally of NERLYNX gross sales in addition to license charges and royalties from our sub-licensees. Product income internet was $51 million within the fourth quarter of 2021, which represents will increase from the $43.4 million in product income internet reported within the third quarter of 2021 and $50 million in product income internet reported in This fall of 2020.

03:45 Product income for the fourth quarter included roughly $5 million of stock construct at our specialty pharmacies and specialty distributors. Royalty income was $2.9 million within the fourth quarter of 2021 versus $2.8 million in Q3 2021 and $2.6 million in This fall 2020. License income was $1.5 million in This fall 2021. We reported 3,454 bottles of NERLYNX bought within the fourth quarter of 2021, a rise from the two,947 bottles bought in Q3 2021.

04:23 Bottles bought within the quarter included an estimated 345 bottles representing stock stocking at our specialty pharmacies and specialty distributors as talked about earlier. New prescriptions had been down 8% in This fall in comparison with Q3, whereas whole prescriptions had been down 2.8%. Bottles bought by way of our specialty distributor community which we frequently consult with as our in-office community had been up 2.6% in This fall in comparison with Q3. Jeff will present additional particulars in his feedback and slides.

04:55 I’ll now present a scientific evaluate of the quarter after which Jeffrey Ludwig will add further colour on NERLYNX business actions, Maximo Nougues will observe with highlights of the important thing parts of our monetary statements for the fourth quarter of 2021. As we now have talked about on prior calls, Puma has an ongoing basket trial of neratinib in HER2 mutated cancers, known as the SUMMIT trial.

05:21 Within the fourth quarter of 2021, Puma met with the FDA to debate the regulatory path for neratinib in sufferers with hormone receptor optimistic HER2-negative breast most cancers, who’ve a HER2 mutation. [Indiscernible] that based mostly on a gathering with the FDA within the fourth quarter of 2019, this arm on the SUMMIT trial was modified such the sufferers had been randomized to obtain both fulvestrant alone, fulvestrant plus trastuzumab, or the mix of neratinib plus fulvestrant plus trastuzumab.

05:52 Underneath the preliminary Simon 2-stage design, every of the three arms enrolled seven sufferers throughout stage 1 and if no affected person in a given arm responded that arm was closed to additional enrollment. If within the first stage a number of sufferers responded the arm was then expanded as much as 18 sufferers. If lower than 4 sufferers within the expanded arm reply that arm was near additional enrollment. If greater than 4 sufferers responded the arm was expanded to 30 sufferers.

06:19 As was beforehand disclosed to buyers and was introduced at San Antonio Breast Most cancers Symposium in 2021 for the primary seven sufferers who had been handled within the fulvestrant alone arm of the trial, no sufferers achieved a response. Within the first seven sufferers who had been handled within the fulvestrant plus trastuzumab arm of the trial no sufferers achieved the response. Within the first seven sufferers who had been handled within the neratinib plus fulvestrant plus trastuzumab arm of the trial, a number of responses had been seen and subsequently the factors is met to broaden to stage 2 of the Simon 2-stage design. That arm of the trial was expanded to additional enrollment, an extra 18 sufferers have been handled with the mix of neratinib plus fulvestrant plus trastuzumab. Enrollment to this arm has been stopped whereas we analyze the extra knowledge.

07:09 On the assembly with the FDA within the fourth quarter of 2021, the information from the seven sufferers randomized to every of the three arms who shared with the FDA. Puma additionally notified the FDA that that they had enrolled an extra 18 sufferers who’ve been handled with the mix of neratinib plus fulvestrant plus trastuzumab and if the information from these 18 sufferers may very well be shared with the FDA in 2022. Puma plans to submit this knowledge within the first half of 2022 and schedule a gathering to debate the regulatory path for neratinib on this indication. Puma anticipates that the FDA will both enable the corporate to file for accelerated approval based mostly on single-arm knowledge or might require further knowledge or it might require a separate randomized trial for this indication. If a randomized trial is required, the corporate will decide what are to not proceed based mostly on the time and price of the trial versus the potential market alternative.

08:04 Extra knowledge from this cohort might be introduced within the first half of 2022. Puma will proceed to replace buyers on the standing of this because it progresses. As buyers are additionally conscious in November 2020, we introduced interim outcomes from one other cohort of the SUMMIT trial and extra particularly the cohort of sufferers with metastatic non-small cell lung most cancers with epidermal progress issue or EGFR, exon 18 mutations who’ve been beforehand handled with an EGFR tyrosine kinase inhibitor. As we have proven within the knowledge that was introduced there have been full responses out of 11 sufferers and subsequently the factors have been met to proceed to stage-2 of the Simon 2-stage design and enroll 30 sufferers. There are at present 31 sufferers enrolled on this arm of the trial and we anticipate that we’ll have further knowledge from this cohort to report within the second half of 2022.

08:55 As soon as we obtain this knowledge, we plan to fulfill with the FDA to debate the regulatory path for this indication. Puma anticipates that the FDA will both enable the corporate to file for accelerated approval based mostly on single-arm knowledge or might require further knowledge or a separate randomized trial for this indication. If a randomized trial is required, the corporate will decide whether or not or to not proceed based mostly on the time and price of the trial versus the potential market alternative. Enrollment to this arm of the trial has been halted whereas we analyze the present knowledge and look forward to regulatory steering.

09:28 I’ll now flip the decision over to Jeff Ludwig, Puma’s Chief Business Officer for a evaluate of our business efficiency in the course of the quarter.

Jeff Ludwig

9:36 Hey. Thanks, Alan. Recognize it and because of everybody for becoming a member of our fourth quarter earnings name. Earlier than I transfer into the business evaluate, only a reminder that I might be making forward-looking statements. Commercially, we stay targeted on three areas: primary, leveraging the evolving optimistic scientific knowledge for NERLYNX; two, participating and educating sufferers to ask for NERLYNX; and three, rising our affect within the discipline drive execution and evolution. It’s nice to see progress being made to assist assist ladies battling breast most cancers general however this market clearly stays below penetrated and extra have to be executed and we clearly consider that NERLYNX can play an even bigger function in serving to sufferers all through their journey.

10:21 We had been joyful to announce in This fall that NERLYNX was included in two vital NCCN Scientific Follow Guideline Updates for the therapy of breast most cancers. The primary replace added NERLYNX to the physique of the rules for the therapy of adjuvant HER2 optimistic breast most cancers below the heading helpful in sure circumstances. Beforehand NERLYNX was included as a footnote solely. The up to date tips recommends contemplating prolonged adjuvant neratinib for sufferers with HR optimistic, HER-2 optimistic illness with a perceived excessive danger of reoccurrence.

10:51 The second replace concerned inclusion of dose escalation as an strategy to enhance the tolerability of neratinib within the therapy of adjuvant HER2 optimistic breast most cancers. These NCCN updates are vital as many establishments practices and clinicians’ references tips within the therapy choices. As highlighted on our Q3 earnings name, we applied some vital organizational modifications in This fall. These modifications had been applied based mostly on the evolving oncology market and had been designed to streamline our business group, not solely to higher align our monetary sources, however as importantly to simplify reporting constructions, scale back layers of administration and enhance general possession and execution on the buyer degree.

11:36 We revised concentrating on to assist our groups higher focus our efforts and began constructing out a core strategic accounts crew to higher align with our largest clients. Though it is nonetheless early, I am proud of the general transition and the brand new organizational construction. I consider we’re in a greater place to adapt to the evolving market and focus our efforts the place they matter most. With that high-level replace, let me transition to among the U.S. business slides, and I’ll present some further insights alongside the way in which. As soon as I end my remarks, I’ll flip the decision over to Maximo who will evaluate the complete monetary outcomes.

12:11 On Slide 3, our distribution mannequin has not modified. We’ve got two channels that present NERLYNX to sufferers. We refer to those as our specialty pharmacy channel and our specialty distributor channel or in-office shelling out channel. The vast majority of our enterprise continues to circulation by way of the specialty pharmacy channel extra particularly in This fall roughly 76% of our enterprise went by way of this channel, with the remaining 24% of the enterprise flowing by way of the specialty distributor channel. That is consistent with what we reported within the Q3 earnings name as nicely.

12:43 Slide 4 reveals U.S. quarterly internet gross sales of NERLYNX since FDA approval. As Alan famous, our internet product gross sales had been $51 million within the fourth quarter of 2021. This is a rise from the $43.4 million we reported in Q3 of 2021. We’ve got persistently seen will increase in stock within the fourth quarter of every 12 months since launch and we estimate that roughly $5 million of the fourth quarter internet income is attributed to that enhance in stock.

13:13 Slide 5 reveals the bottles of NERLYNX bought by quarter since launch. Please observe, that is what this slide reveals ex-factory bottles bought, so it represents gross sales in your specialty pharmacy and specialty distribution channel and never end-user demand. We bought 3,454 bottles of NERLYNX in This fall of 2021 which is a rise of 507 bottles from our Q3 2021 bottle gross sales of two,947. We estimate that about 345 bottles are attributed to the rise in stock that occurred in This fall.

13:50 Let me present some further perception into the enterprise. New prescriptions and new affected person begins are an vital main indicator for our enterprise. These new affected person begins turning to refills which can affect subsequent quarters by way of whole bottles bought. As we now have beforehand mentioned, we are inclined to see a decline in new affected person begins within the fourth quarter with the next enhance within the first quarter of the next 12 months. That is pushed largely by some sufferers deciding to delay beginning on remedy till after the vacations.

14:21 As Alan talked about, we did see a decline in new affected person begins represented by NRx by about 8% in This fall in comparison with Q3. It is a smaller decline that we now have seen within the final a number of years, however nonetheless nonetheless a decline. The optimistic change is that year-over-year fourth quarter new affected person begins are flat. As well as, we paid shut consideration to enrollments which is one other vital main indicator. Enrollments actually signify the intention to prescribe and there’s a robust correlation between enrollments and subsequent new affected person begins.

14:54 Just like new affected person begins, we now have traditionally seen a drop in This fall enrollments with the next enhance in Q1. This 12 months, we didn’t see a decline in This fall enrollments, as they had been flat to Q3 and had been 2% increased than This fall of final 12 months. We do proceed to see a rise within the variety of sufferers qualifying without cost drug by way of our affected person help program, which is being pushed largely by the restricted availability of co-pay assist from the foundations. That is contributing to the decline in NRx in comparison with enrollments being flat.

15:28 As beforehand reported, we had been excited to have dose escalation added to our label in late June for each our prolonged adjuvant indication in addition to our metastatic indication. As well as, once more, we’re happy that NCCN up to date their Scientific Follow Pointers for breast most cancers to incorporate dose escalation in early stage breast most cancers.

15:46 As you may see, we noticed a rise within the adoption of dose escalation within the fourth quarter had been over 60% of sufferers had been began on NERLYNX at a decrease dose. We’re happy with the rising adoption of dose escalation and consider that this elevated adoption will enhance the general tolerability of NERLYNX, elevated the typical size of remedy and finally enable extra sufferers to obtain the complete advantage of NERLYNX.

16:11 Slide 7 highlights the strategic collaborations we now have shaped throughout the globe with the purpose of constructing NERLYNX out there to extra sufferers around the globe. We proceed to be happy with our international companions with the progress being made. As talked about on the Q3 earnings name, we had been happy that NERLYNX obtained prolonged adjuvant approval in South Korea, metastatic regulatory approval in Taiwan and it was formally launched in Peru, all in early This fall.

16:38 Extra latest highlights embody regulatory approval in Chile within the metastatic setting, regulatory approval in each Brazil and Mexico within the prolonged adjuvant setting an official launch in South Korea. On prime of that we’re extraordinarily happy that in December of 2021, we had been notified by our companion Pierre Fabre that NERLYNX was added to China’s Nationwide Reimbursement Drug Record or NRDL for 2022. NRDL approval is a vital milestone and can considerably enhance entry to ladies battling early stage breast most cancers in China. We’re persevering with to work intently with the companions and stay up for future potential launches in further nations in Europe, Latin America, Asia and the Center East.

17:24 Now Puma was based on a dedication to creating a distinction within the lives of sufferers and their households battling breast most cancers. I wish to thank the business crew for his or her ardour and dedication to creating such a distinction. We all know extra have to be executed and we won’t cease till we now have achieved our targets.

17:39 I’m now going to show the decision over to Maximo for a evaluate of our monetary outcomes. Maximo?

Maximo Nougues

17:47 Thanks, Jeff. I’ll start with a short abstract of our monetary outcomes for the fourth quarter of 2021. Please observe that I’ll make comparisons to Q3 2021, which we consider it is a greater indication of our progress as a business firm and year-over-year comparisons. For extra data I like to recommend that you just consult with our 2021 10-Ok which we might be filed at the moment and consists of our Consolidated Monetary Statements.

18:17 For the fourth quarter of 2021, we reported internet earnings based mostly on GAAP of $4.2 million or $0.10 per fundamental and diluted share. This compares to our Q3 2021 internet lack of $44.7 million or $1.09 per share. On a non-GAAP foundation, which is adjusted to take away the affect of stock-based compensation expense, we reported internet earnings of $8.4 million or $0.21 per fundamental and diluted share for the fourth quarter of 2021.

18:56 Gross income from NERLYNX gross sales was $64.5 million in This fall 2021 versus $53.8 million in Q3 21. Alan talked about it, internet product income from NERLYNX gross sales was $51 million in comparison with the $43.4 million we reported within the third quarter of 2021. We consider that This fall internet gross sales included roughly $5 million of stock shopping for from our distributors. Royalty income totaled $2.9 million within the fourth quarter of 2021 versus $2.8 million in Q3 2021.

19:38 Our gross internet adjustment in This fall 2021 was about 21%, a rise from the 19.4% gross to internet adjustment in Q3 2021. The rise was pushed primarily by increased Medicaid rebate, increased co-pay and better curiosity participation in authorities pricing. Value of gross sales for This fall 2021 was $11.9 million together with $2 million for the amortization of intangible belongings associated to our neratinib license. Value of gross sales for Q3 2021 was $10.3 million. Going ahead, we’ll proceed to acknowledge amortization of milestones to the licensor for about $2 million per quarter as price of gross sales.

20:32 For fiscal 12 months 2022, Puma anticipates the web product income might be within the vary of $180 million to $190 million. We additionally anticipate that our gross to internet adjustment for the full-year 2022 might be between 21.5% and 22.5%. Moreover, for the fiscal 12 months 2022, we anticipate receiving royalties from our companions around the globe within the vary of $27 million to $34 million and license income within the vary of 0 to $1.5 million. We acknowledge it continues to be a substantial amount of uncertainty relating to the affect of COVID-19 and this will proceed to negatively affect our gross sales, royalties and license income.

21:27 Traditionally, the primary quarter represents the bottom internet product gross sales quarter of the 12 months attributable to a variety of elements, together with stock construct within the channel within the fourth quarter of the prior 12 months, which has a unfavorable impact of our bottles bought in Q1, in addition to increased gross to internet attributable to increased co-pay and protection gaps bills that usually happen within the first quarter. We are also anticipating that Q1 revenues might be impacted by the upper quantity of free drug wanted to be administered because of the decline in funding for the Medicare foundations that Jeff talked about it in his remarks.

22:12 We anticipate that Q1 2022 NERLYNX internet gross sales might be within the vary of $35 million to $39 million, I’ll repeat that $35 million to $39 million. This steering assumes that $5 million of the stock shopping for from This fall is price doing the quarter. We additionally anticipate Q1 royalty revenues might be within the vary of $5 million to $7 million. We anticipate that gross to internet adjustment in Q1 2022 might be roughly 23% to 24%.

22:54 SG&A bills had been $22.5 million within the fourth quarter of 2021 in comparison with $26.1 million from Q3 2021. SG&A bills included non-cash prices for the stock-based compensation of $2.4 million for the fourth quarter of 2021 in comparison with $3 million for Q3 2021. Analysis and improvement bills had been $14.2 million within the fourth quarter of 2021 in comparison with $18.8 million for Q3 2021. R&D bills included non-cash prices for stock-based compensation of $1.8 million within the fourth quarter in comparison with $1.3 million for Q3 2021.

23:42 Within the fourth quarter 2021, Puma reported money burn of $5.4 million in comparison with money burn of $21.4 million in Q3 2021. The money burn for the complete 12 months 2021 was $11.3 million. Because of the fee containment actions throughout the corporate applied within the fourth quarter of 2021, Puma is anticipating decrease working bills in 2022 in comparison with 2021. Extra particularly, we anticipate SG&A bills to be down roughly 15% to twenty% and R&D bills to be down 10% to fifteen% year-over-year.

24:28 At December 31, 2021, we had $82.1 million in money, money equivalents and marketable securities. Our accounts receivables steadiness on the finish — at 12 months finish was $32.5 million. Our accounts receivable phrases vary between 10 and 68 days, whereas our days gross sales outstandings are about 48 days. We estimate that as of December 31, 2021, our distribution community preserve roughly 5 weeks of stock. Total, we proceed to deploy our monetary sources to give attention to advancing of neratinib by way of ongoing scientific trials and the commercialization of NERLYNX.

Alan Auerbach

25:14 Thanks, Maximo. The COVID-19 pandemic has continued to current business challenges to Puma, as even with the vaccinations which were administered in 2021, we nonetheless are noting that varied to business entry are nonetheless in place. We’re hopeful that with COVID circumstances declining, these varies will scale back sooner or later, which ought to enhance the power of our business crew to entry and work together with well being care suppliers to extend their consciousness of the NERLYNX knowledge.

25:41 We additionally acknowledge the uncertainty as to why an entry to well being care suppliers enhance and we’re remaining conservative in our outlook for enhancements and entry for this 12 months. Puma’s senior administration in cooperation with the Board of Administrators continues to stay targeted on bettering NERLYNX gross sales in 2022 and past. Within the fourth quarter of 2021, we applied a discount in bills with the purpose of decreasing bills to be able to maximize operational money flows. The corporate stays dedicated to defending these operational money flows and we’ll proceed to cut back bills if wanted to attain this. We stay up for updating buyers on this sooner or later.

26:22 There continues to stay a big unmet want for sufferers battling breast most cancers, lung most cancers and different strong tumors, we at Puma our dedicated and obsessed with discovering simpler methods at serving to these sufferers throughout their journey and we’ll proceed to try to attain that purpose.

26:39 This concludes at the moment’s presentation. We’ll now flip the ground again to the operator for Q&A. Operator?

Query-and-Reply Session

Operator

26:46 We’ll now start the question-and-answer session. [Operator Instructions] Your first query comes from Ed White with H.C. Wainwright. Please proceed together with your query.

Edward White

27:15 Good afternoon. Thanks for taking my questions. So, relating to the gross sales drive, is the gross sales drive proper sized now and perhaps when you can provide us slightly bit extra data on digital gross sales calls versus in particular person calls within the fourth quarter? How that compares to the third quarter and what you are seeing to this point in 2022?

Alan Auerbach

27:40 Hello, Ed. Let me reply your second query after which I will have Jeff reply the primary one. When it comes to the digital calls versus reside, it is working about 50-50, about half of the calls are in particular person half of being executed nearly. We’ve not actually seen that change a complete lot but. We’re hopeful it’ll change extra in the course of the 12 months. When it comes to the dimensions of the gross sales drive Jeff goes to remark please.

Jeff Ludwig

28:04 Yeah. Certain, joyful to. And I consider we have got the appropriate dimension for the chance right here. As I discussed, we made this transformation, definitely not simply to maximise sources, however to actually capitalize or proper sized for the change within the oncology market. There are increasingly clients which have gone to digital or most popular digital together with some continued accounts that aren’t accessible. So, it has allowed us to cut back our footprint, however finally, we really feel nonetheless be capable to cowl the overwhelming majority of our enterprise. And I do know this query was requested on the final name as nicely, we can pay very shut consideration to this product. That is promotionally delicate. If we come to the purpose the place we can’t get in entrance of the appropriate clients to enhance our enterprise, we’ll make a enterprise case and alter that appropriately. However proper now, we really feel excellent in regards to the dimension and is a part of that construction we put all components of our gross sales drive our [indiscernible] or scientific nurse educators, our scientific specialists or gross sales reps and our strategic account managers below an area management crew, to allow them to make proper choices in a fast environment friendly and hopefully speedy style. So, we be ok with it.

Edward White

29:16 Thanks. You talked about if the distribution networks on the year-end about 5 weeks of stock are there, what do you anticipate to see all through 2022 extra just like the 4 weeks of stock stocking?

Alan Auerbach

29:33 Yeah. So, we at all times see within the 4 quarter a listing purchase in and that is one thing we have seen yearly. Our anticipation is and Maximo commented this in his feedback, we noticed the stock purchase during which was roughly 345 bottles in This fall. We’re anticipating to see that burn down in Q1. And so, due to that burn down, it should affect our Q1 gross sales and we see that development when you take a look at the determine we put up, we see that development each time. Our present expectation is that stock will stay flat Q3 to This fall, — I am sorry, Q2 and Q3 after which come again up in This fall once more, as you get the stock shopping for once more.

Edward White

30:16 Okay. Nice. Thanks, Alan. That is what I used to be searching for. After which simply sticking a bit extra about technique and enterprise improvement. How — are you any potential targets now, or are you something maybe early stage merchandise or late-stage merchandise and even at present marketed merchandise that you should use leverage your gross sales reps to acquire worth. I simply needed to get your ideas in your BD improvement? Thanks.

Alan Auerbach

30:49 Yeah. Thanks for asking, Ed. We have at all times been evaluating further medicine to in-license. We are typically extra of a product centric firm and that of know-how centric one that means, we’re not prone to become involved in any platform that requires an enormous preclinical R&D investments. The corporate is a, what’s known as an NRDL. So, in our analysis improvement solely, will we really feel there are early stage scientific belongings that may very well be developed, I feel that is a good assumption. Definitely, as we’re going to have a whole lot of working money flows this 12 months, assuming, we hit our numbers, and all of the numbers are available in and we expect they are going to in our bills keep the place they’re, or go down and investing that money circulation in different belongings definitely wouldn’t it make sense as a strategy to contribute worth to stockholders. Clearly, we’d be very choosy and we might not search for one thing that might have a unfavorable affect on these money flows.

Edward White

31:55 Nice. Thanks, Alan for taking my questions.

Alan Auerbach

32:01 Certain.

Operator

32:04 Your subsequent query comes from Yigal Nochomovitz with Citi. Please proceed together with your query.

Carly Kenselaar

32:09 Hello. That is Carly on for Yigal. Thanks a lot for taking our questions. We had been simply hoping you possibly can go right into a bit extra element on the dialogue you had with the FDA final quarter on the trail ahead for HER2 mutated breast most cancers. I assume given the FDA had beforehand requested the modification to SUMMIT to isolate the impact of neratinib within the randomized stage one portion. I used to be simply curious why you now consider the FDA might probably require one other examine — one other randomized examine right here? Thanks.

Alan Auerbach

32:43 Yeah. Thanks, Carly. The randomization they required was to randomize the sufferers to both neratinib plus Herceptin plus fulvestrant versus Herceptin fulvestrant versus fulvestrant alone. These wouldn’t be thought of the usual of care, if you’ll, for that business and it was solely seven sufferers. I feel that in the event that they do require us to do a randomized trial, I’d anticipate it will in all probability be the place we now have to throw in one thing that represents the present normal of take care of ER optimistic sufferers, which can in all probability be one thing of a doctor’s alternative kind of factor, so that you’re right. The aim of the randomization was to isolate the results of neratinib however I do not assume — primary, I do not assume solely seven sufferers could be a regular of care. However extra importantly, I do not know that fulvestrant alone could be a regular of care in that setting both, so I feel that is the place the — if the FDA requires one that might be in all probability the speculation as to why.

Carly Kenselaar

33:46 Okay. Obtained it. Thanks for taking the query.

Operator

33:52 Your subsequent query comes from Marc Frahm with Cowen. Please proceed together with your query.

Marc Frahm

34:00 Thanks for taking my query. You simply answered what was going to be first one on breast query, perhaps only a comparable query on sort of what that randomized trial would seem like on the lung most cancers facet for these discussions later within the 12 months and sort of what the expectations are there?

Alan Auerbach

34:16 Yeah. Hello, Marc. I do not know the reply to what it will seem like, my assumption could be. So, we’d in all probability be sufferers with EGFR exon 18 mutated lung most cancers. There could be sufferers who already had an EGFR tyrosine kinase inhibitor. So once more, if they are going to take a single-arm trial then that would be the strategy to proceed in the event that they want a randomized trial. I’d assume it towards there in a Pierre. I do not know till we discuss to them and once more these are each small indications. So, it will if once more if they need a single-arm trial, we are able to definitely take a look at what the ROI on that might be, in the event that they wish to randomized one, we would want to have a look at what the ROI is given the market alternative and definitely on the time that we take within the cash we take to try this. Once more, we wish to shield our operational money flows. It is essential to us to try this. And so, it is clearly that is the choice, we have to make.

Marc Frahm

35:15 Okay. That is sensible. After which perhaps there’s any updates you may present on the T790M patent circumstances and prosecuting that sample?

Jeff Ludwig

35:28 Yeah. So, Marc relating to the T790M IP that Puma has, as I am certain you may think about the subject you are discussing within the very delicate authorized matter, and so there’s not likely how a lot we are able to touch upon.

Marc Frahm

35:43 Okay. Truthful sufficient. Thanks.

Operator

35:45 Your subsequent query comes from Geoff Meacham with Financial institution of America. Please proceed together with your query.

Alex Hammond

35:53 Hello. That is Alex on for Geoff. Thanks for taking my query. Are you able to present any colour on why the Section II knowledge from the SUMMIT trial of neratinib and typical most cancers sufferers with HER2 mutations was pushed from the primary half to the second half? Thanks.

Alan Auerbach

36:08 Sure. When it comes to the information for neratinib in HER2 mutated cervical most cancers and shifting it from first half to the second half. We didn’t — it get knowledge collectively in time to submit it to FGL (ph) which might be the convention we’re searching for. So subsequently, we’ll be the subsequent convention we had been capable of do it at is within the second half.

Alex Hammond

36:31 All proper. Thanks.

Alan Auerbach

36:33 If I bear in mind off the highest of my head. It is the forward. I feel we had been taking pictures for [indiscernible] for that one. It is actually only a timing subject we could not get it executed for the FGL deadline.

Operator

36:47Thank you. Our subsequent query comes from the road of Gena Wang with Barclays. Please proceed together with your query.

Unidentified Participant

36:53 Hello. Thanks for taking our questions. That is Tom (ph) for Gena. We simply needed to ask about — we now have two questions and first one about lung metrics and may you simply remind us about present criticism price and implementation of the revenue therapy for diarrhea, is there any change? And my second query is considering the expansion alternative in 2022, how a lot price of affect do you anticipate from the latest steering replace in addition to the China reimbursement program?

Alan Auerbach

37:25 Yeah. I am sorry are you able to repeat these questions. We did not hear it fairly nicely. So, when you can communicate up slightly bit drastically admire that, please.

Unidentified Participant

37:33 Certain. So, the primary query is about, are you able to remind us in regards to the present compliance price and revenue therapy for diarrhea, is there any change there and in addition different metrics when you can have extra colour on that entrance? The second query is about I take into consideration the income progress alternative in 2022, how a lot optimistic affect from latest NCCN steering replace in addition to China reimbursement program.

Alan Auerbach

38:07 So by way of the compliance price, if you’ll, the principle diarrhea prophylaxis that we’re is using the dose escalation, as Jeff put in his slide, we now have seen that elevated quarter-over-quarter. We might anticipate that that might proceed as we enhance consciousness of it. And as you talked about, it is within the NCCN tips as nicely. And relating to the how a lot affect the NCCN tips can have on income going ahead, we’re definitely hopeful that the enhancements of the rules including relative to the physique can have a optimistic affect. And by way of the China that is going to be a really main affect on our numbers positively. The marketplace for HER2 optimistic breast most cancers in China might be 2 instances to three instances by way of variety of sufferers, what it’s within the U.S. and definitely being added to the NRDL, which signifies that the federal government is reimbursing it. It is a fantastic factor for sufferers and clearly have a really optimistic affect on our numbers. So, as you heard in our steering, we’re anticipating a really large ramp-up in our royalties and that’s — all of our companions are displaying progress, which is fantastic. After which in Europe, we’re displaying good progress, et cetera, however the large bounce up is the China income there.

Unidentified Participant

39:31Maybe, did you point out the compliance price, the present compliance price there any change there?

Alan Auerbach

39:42 While you say compliance charges, are you able to make clear

Unidentified Participant

39:46 Like affected person once they began and keep on the fee?

Jeff Ludwig

39:53 So let me attempt to deal with that. We do measure cohorts of sufferers, actually by quarter. And as you take a look at and we do anticipate because the adoption of dose escalation continues. You will see a decrease discontinuation price and hopefully an extension of general size of remedy. The majority of our sufferers have come on remedy on dose escalation within the final six months to 9 months. So, we do not have a full evaluation of that but, however I can inform you that suggestions from clients may be very optimistic round dose escalation, it is simpler for sufferers, simpler for nurses and simpler for purchasers and we have got fairly robust podium assist from a few of our KOLs about implementing dose escalation as nicely.

Unidentified Participant

40:35 Thanks.

Operator

40:39 Thanks. This concludes our question-and-answer session. I wish to flip the convention again over to Mariann for closing remarks.

Mariann Ohanesian

40:47 Thanks all for becoming a member of us at the moment. As a reminder, this name could also be accessed by way of replay of the webcast at pumabiotechnology.com starting later at the moment. Have night.

Operator

41:01 Women and gents, thanks for collaborating in at the moment’s convention name. This concludes our program. Everybody have an important day. Chances are you’ll now disconnect.

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